AD Banker Comprehensive Practice Exam

Which type of insurance provides coverage for a specific time period?

1. Whole life insurance

2. Term life insurance

3. Universal life insurance

4. Endowment life insurance

The correct answer is: Term life insurance

Term life insurance is designed to provide coverage for a specific time period, or "term," which can vary in length, typically ranging from one to thirty years. If the insured individual passes away during this term, the policy pays out a death benefit to the beneficiaries. If the insured outlives the term of the policy, the coverage ends, and there is no payout or value accrued. This feature distinguishes term life insurance from other types of life insurance. Whole life, universal life, and endowment life insurance policies typically provide lifetime coverage or have cash value components that accumulate over time, which means they do not limit their coverage to a set period like term life does. This unique characteristic of term life insurance makes it a popular choice for individuals seeking affordable coverage to protect their loved ones during specific financial obligations, such as raising children or paying off a mortgage.